Lifting people out of poverty through ‘managed’ urbanization

Submitted by Jos Verbeek
On Mon, 05/06/2013

The Global Monitoring Report[1] (GMR) is the World Bank’s and the International Monetary Fund’s vehicle to not only report on progress toward the Millennium Development Goals (MDGs) but, equally importantly, to analyze a theme relevant for development in general and the MDGs in particular. The thematic analysis of GMR 2013[2] focuses on differences in attainment of the MDGs across the rural and urban space and discusses the role of urbanization.

As shown in the 2009 World Development Report[3] on economic geography, agglomeration/urbanization and higher incomes go hand-in-hand. In addition, urban areas also do better in attaining the MDGs than rural areas.

Extreme poverty is lower in urban areas than in rural areas. Using the full poverty data set of 2008, we estimate that, globally, urban poverty stood at 11.6 percent that year, well below the poverty rate of 29.4 percent for the rural population.

This is not much different from the other MDGs. For example, improving basic sanitation, one of the MDGs that is proving difficult to achieve globally, 80 percent of urban residents versus 50 percent of rural residents had access to a toilet in 2010. Part of this is related to the cost of service provision. Urban areas can deliver services cheaper than rural areas due to network scale economies. For example, in Niger, the average price per cubic meter of water when on a network is 1/5 of the price per cubic meter of water from a vendor.

When differences are not that large between rural and urban areas, as with primary school completion, then often the quality in rural areas lags behind that of urban areas. Again, there is evidence that teacher absenteeism is quite a bit larger in rural schools compared to urban schools and it is often more difficult for rural schools to attract teachers.

Another observation is that the world is not bi-polar. People do not live in small villages or mega cities. People live in the vast spectrum of settlements in between. But, not so the poor. The poor are disproportionally located in rural areas and small towns.

Last but not least, if the process of urbanization is managed well, we see that cities emerge as centers of economic prosperity and social inclusion, supporting well-paying jobs and better MDG-related outcomes while, if managed poorly, slums emerge and pollution rises, risking hard won development achievements.

So what does all this mean for developing countries and their policy makers? It is one thing to understand the interrelationship between rural-urban dynamics and development, it is another to know what to do about it. What guidance can we distill from the observations just presented?

Well, one conclusion is that we should encourage urbanization, not hinder it or try to slow it down. Another conclusion is that we should facilitate mobility, particularly in those countries that have hardly urbanized, again not hinder it.

How do we promote urbanization? It is clear that urbanization mattered in the past and will continue to matter going forward as 96 percent of the 1.4 billion additional people in the developing world between now and 2030 are anticipated to live in urban areas. GMR 2013 calls for an integrated strategy to better manage the planning-connecting-financing formula of urbanization, where planning comes first. Better upfront planning will allow governments and city officials to be in the driver’s seat and not being pushed around by private financiers or donors who often come with their own priorities, which do not always align with that of the country or the city. Hence, inclusive planning, including preparing and prioritizing of investment projects in advance will allow governments and cities to better control their destiny, although this might be quite a challenge for small towns where resources and capacity are constrained.

We know that urbanization has not always been managed well in the past and consequently the world has seen a growth of slums. Currently, close to one billion people globally call slums their home. GMR 2013 offers a variety of measures that can help improve their lives. One is to stop discriminating against slums and provide them with services, irrespective of whether slum dwellers can prove residency. Due to these obstacles slum dwellers often face higher costs of service provision, further deteriorating their already-poor living conditions.

The second issue we have highlighted is how to facilitate domestic mobility, particularly when urbanization is still rather low. The report advocates a focus on delivering those services in rural and urban areas that improve human capital, like health and education, as these equip people with skills and keep them healthy wherever they are and wherever they go. This will prepare them better for the jobs they seek when migrating to an urban area or improve their productivity in the rural economy.

You might say why not also focus on the network/infrastructure related MDGs. Well, most likely, resources are limited and, thus, priorities have to be set and it might just be better to improve poor people’s opportunities than to invest in poor places where people might not live in the near future. We need to obviously nuance this a bit.

First, for countries which have already urbanized and where productivity in rural areas is already close to the maximum possible, then, resources permitting, one should aim to equalize MDG-related service delivery across rural and urban areas and for all MDGs. Let’s not forget the MDGs are basic, very basic development outcomes.

Second, in some countries network related services, such as water and sanitation, might very well be the crucial bottle neck to improving health outcomes and if that is the case one should not ignore them. Nevertheless, we see various innovative delivery mechanism including public private partnerships emerging in rural places that can deliver water, for example, without the need for bulky network investments and, consequently, at reduced costs.

Third, we need to realize that people move but not overnight and not all at the same time. Hence, some equalization across rural-urban areas is needed.
Building on this last point that people will not migrate overnight and recognizing that about 75 percent of the poor reside in rural areas, what is needed is rural development policies that assist farmers improve their productivity and connect them to markets which are often in urban areas. Such policies are particularly needed in areas where productivity gaps are large, as in many places in Sub-Saharan Africa. In addition, improving connectivity should be high on the policy agenda as it cuts both ways. It provides not only rural farmers with access to urban markets but also urban producers of manufactured goods and services with an outlet in the rural areas.

The pertinence of migration, rural-urban disparities and the spatial location of the poor all underscore the importance of not forgetting that solutions for successful attainment of the service delivery MDGs would be most effective if they are tailored to the circumstances and needs of specific countries.

In closing, GMR 2013 highlights that urbanization, if managed well, is a force for the good and to assist this process, let’s facilitate mobility. Even though one should aim for delivering the MDGs irrespective of geographical location, when budgets are tight one could usefully focus on those MDGs that build portable human capital. And, last but not least, the world needs to remain vigilant in improving agricultural productivity and rural-urban connectivity as many of the poor will remain in the rural areas for some time to come.